Nature and Science, 3(1), 2005, Xiong and Guan, Analysis of Foreign Capital Used in China’s Three Provinces
Comparison Analysis of Foreign Capital Used in China’s
Northeast Three Provinces
Juan Xiong1, Jiancheng Guan2
1 School of Management, Beijing University of Aeronautics and Astronautics, Beijing, China; Heilongjiang
University, Harbin, Heilongjiang, China; xiongjhlju@hotmail.com
2 Research Unit for R&D/Innovation Management at the School of Management, Beijing University of
Aeronautics and Astronautics, Beijing, China
Abstract: After China Government implemented a strategy to develop China’s western region, it
decided to implement a strategy to revitalize the old industrial bases in China’s northeast. But how about
is the situation of China’s northeast? This article analyses the situation and characteristic o f foreign
capital used in China’s northeast three provinces－Heilongjiang province, Jilin province and Liaoning
province to find the difference among the eastern parts. At the same time, we put forward the way to
utilize foreign capital in China’s northeast to participate in the reform of the old industrial bases, to
improve economic development of three provinces in China’s northeast. [Nature and Science.
2005;3(1):81-87].
Key words: foreign capital used; three provinces in China’s northeast; old industrial bases
1
same time Chinese economy improved rapidly to create
favorable conditions for utilization of foreign capital.
－ Increasing employment opportunity;
Introduction
According to UNTDO statistics, from 1980 to
2002, the whole world FDI increased constantly. Up to
2002, the accumulative total volume of global FDI was
USD 7.1 trillion, and the country of absorbing FDI most
was America, its total volume was USD 1351 billion.
UK and Germany were in the second and the third
places, the total volumes were USD 639 billion and
USD 452 billion. As the country developed most rapidly
in the developing countries, China was in the forth place
in 2002 from the 17th place in 1990, the total volume of
FDI was 448 billion. In 2003, the amount of foreign
capital actually used was USD 53.505 billion in China.
(Appendix I ). Foreign capital gets an increasingly
important role of China economic development. At the
－ Increasing financial revenue;
－ Improving foreign trade and foreign economic
cooperation development.
But the regional distribution differs greatly from
the utilization of foreign capital in China. Up to 2003,
the east part of the country was 86.27%, the central
region was 8.93% and western region was 4.8% in Chin
total amount of foreign capital actually used. (Table 1,
Table 2). So we will analyze the situation and
characteristic of foreign capital used in three provinces
－Heilongjiang province, Jilin province and Liaoning
province of China central region to find the difference
between them and east part.
Table 1. Up to 2003, China east, central and western region utilization of foreign capital
(USD 100 million)
Amount of foreign capital
Number of projects
Region
Amount of foreign capital
specified in contracts
Ratio(％)
actually used Ratio(％)
Ratio(％)
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Nature and Science, 3(1), 2005, Xiong and Guan, Analysis of Foreign Capital Used in China’s Three Provinces
Total
100
100
100
East region
82.00
86.86
86.27
Central region
11.27
7.55
8.93
Western region
6.73
5.59
4.80
According to：<China Foreign Capital Utilization Report > 2004
Table 2. 2003 China east, central and western region utilization of foreign direct investment
(USD 100 million)
Amount of foreign
Amount of foreign
Number of
Region
Ratio(％)
capital specified in
Ratio(％)
capital actually
Ratio(％)
projects
contracts
used
Total
41081
100
1150．70
100
535．05
100
East region
36159
88．02
1005．30
87．36
459．51
85．88
Central region
3177
7．73
95．52
8．30
58．31
10．90
Western region
1745
4．25
49．88
4．33
17．23
3．22
According to：<China Foreign Capital Utilization Report > 2004
2 The general situation of the foreign capital
utilized in China northeast three provinces
Heilongjiang Province: Up to the end of 2003, the
accumulative number of foreign capital projects
approved 6876, the amount of foreign capital specified
in contracts was USD 7.102 billion, total amount of
foreign capital actually used was USD 4.682 billion,
and foreign funded enterprisers were 2980. And in 2003,
the new foreign capital projects increased 239, the
amount of foreign capital specified in contracts was
USD 0.488 billion, the amount of foreign direct
investment actually used was USD 0.322 billion.
Jilin Province: Up to the end of 2003, the
accumulative number of foreign capital projects were
6986, accumulative total amount of foreign capital
actually used was USD 3.659 billion, and in 2003, the
new foreign capital projects increased 340, the amount
of foreign direct investment actually used was USD
0.191 billion.
Liaoning Province: Up to the end of 2003, the
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accumulative number of foreign capital projects were
12437, the amount of foreign capital specified in
contracts was USD 32.928 billion, accumulative total
amount of foreign capital actually used was USD
16.253 billion, and in 2003, the new foreign capital
projects increased 2231, the amount of foreign direct
investment actually used was USD 2.824 billion.
For the circumstances of foreign capital used in
northeast three provinces, Liaoning Province was in the
first place, which led Heilongjiang Province and Jinlin
Province on matter what the number of foreign
enterprisers, the amount of foreign capital actually used,
or the increasing rate of foreign capital used. The main
reasons of these were the favorable geographical
position and good foundation of an open economy
policy in Liaoning Province.
Although the number and amount of foreign capital
used in Northeast are increasing continuously,
especially Liaoning Province, whose number of foreign
enterprisers was near the coastal provinces and city,
they fell behind comparing eastern coastal provinces
and city (Table 3).
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Nature and Science, 3(1), 2005, Xiong and Guan, Analysis of Foreign Capital Used in China’s Three Provinces
Table 3. Up to the end of 2003, the utilization of foreign direct investment in some east part in China -- five
provinces and one city (USD 100 million)
Accumulative total amount of foreign
Total amount of foreign capital
capital specified in contracts
actually used (USD 100
( USD 100 million)
million)
Numbers of foreign
Province or city
enterprises
Shandong Province
19737
399.67
248.97
Jiangsu Province
25061
990.15
522.38
Zhejiang Province
14722
315.23
159.35
Fujian Province
12974
320.59
262.20
Guangdong Province
34507
737.77
777.58
Shanghai City
16510
487.81
278.56
According to: <China Foreign Capital Utilization Report > 2004
3 Analyzing the main Characteristics of foreign
capital used in China Northeast three provinces
We know that attracting foreign capital actively is
essential condition to speed economic development. The
contributing effect and big or small has closed relations
for coordinating level of local region factor and the
government policy. China’s middle region has a vast
land where the situations of industrial development have
differed greatly with eastern part.
Northeast three provinces were the base camp of
China industrial economy in the period of planned
economy. It was the most abundant region of industrial
resources that almost concentrated all China heavy and
chemical industry, such as Daqing oil field in
Heilongjiang province, the chemical and automobile
industry in Jilin province, iron and steel industry in
Liaoning province, and some large mines. So we can
say that China’s northeast almost represent China
industry. In the industrial basis field, it is the first for not
only heavy and chemical industry, but also
communication and transportation in China. In the
human resources field, it is in the lead for the rate of
technical staff in China. In the agriculture field, it is rich
in natural resources – Heilongjiang and Jilin is the
agricultural – produced base. But the people are only
100 million, just near Shandong province. So in the
early days of China reform, northeast had more strength
to compare with eastern coastal part.
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But with the deepening of China reform, the
development of northeast fell behind eastern coastal part.
The main reasons were that it is didn’t do its best at its
economic transform. It has differed greatly with eastern
part in the ownership structure. Up to the end of 2001,
the rates of state-owned enterprises in northeast three
provinces were 78.2%of Liaoning, 86.2% of Jilin, and
87.2% of Heilongjiang. These rates were higher than
eastern coastal part, and also higher than all county’s
average level – 64.9% (Huang, 2003). And the more
scales of state-owned enterprise, the more difficult it
adjusted. On the other hand, northeast three provinces
have some problems in the market opening, the
government ideas and the whole investment
environment fields. So it has characteristics of foreign
capital used.
3.1
The function of government
In the course of utilization foreign capital, the
government of northeast three provinces attaches great
importance to organizing function of the government,
combine government affairs with economy and trade
closely. They help enterprises to build the platform to
find the cooperating partner. On the other hand, the
government which attracted investment can solved the
contradictions of the high costs and low successful rate
for enterprises that temper themselves in the market. For
example, Heilongjiang government held the fourteenth
economy and trade fairs, twentieth Harbin ice and snow
festivals;
Liaoning
government
held
Dalian
international fashion festival, Shenyang – China
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Nature and Science, 3(1), 2005, Xiong and Guan, Analysis of Foreign Capital Used in China’s Three Provinces
international equipment manufacture fair, APEC Dalian
conference. Through these activities, they extend
China’s northeast well-know measures and effects at
home and abroad, promote foreign investors’
understanding for prospect of economy and social
development, improve foreign investors’ confidence.
But in China’s northeast three provinces, the whole
investment environment is not perfect. For example,
some laws and regulations didn’t amplify; they stressed
management environment to the neglect of law
environment; there are more examination and approval
systems; and sometimes happened charging and
checking decision. All of these obstruct the reform of
northeast three provinces.
3.2 The fields and region of absorbing foreign
capital
The beginning of the reform, the fields for
utilization of foreign capital centralized the processing
industry of the second industry and real estate of the
third industry. After over ten years developing, the field
for utilization of foreign capital has changed greatly in
northeast three provinces. In the field of the first
industry, foreign capital is entering the projects of green
food and deep process of agriculture products; in the
second industry, it got actual effect for utilization of
foreign capital to transform state-owned big and middle
enterprises, now the step is speeding for foreign capital
to enter the high technology industry field; in the third
industry, the field of foreign capital is extending, such
as the fields of finance, insurance and tourist. And the
scale for utilization of foreign capital is extending in the
field of basis facilities construction and education.
In the northeast, the regions for utilization of
foreign capital were disequilibrium. In Liaoning
province, the foreign capital centralized in Shenyang
and Dalian city; in Jilin province, it centralized in
Changchun and Jilin cities; and in Heilongjiang
province, it centralized in Harbin. Except them, other
area had a little amount of foreign capital. For example,
during “the ninth –five years plan”, the amount of
foreign capital used was USD 2.2 billion annual, and
USD 1.2 billion was invested in Dalian, other cities
were invested a little in Liaoning province (Jiang,
2003).
3.3 The scale and quality for utilization of foreign
capital
Now the large project is increasing evidently. In
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Liaoning province, in 2001, the number of projects
which invested above USD 5 million was 310, the
amount of foreign capital utilized through the signed
contracts was USD 4.18billion, increased by 54.2% and
66.5% over the preceding year. In Heilongjiang
province, the number of the new projects approved 17
in 2001, which invested over USD 10 million each, the
total amount was USD 0.37 billion. Every project was
USD 15 million equally.
At the same time, northeast provinces attach
importance to absorb the investments of the world top
500 company. Now there are many world-famous
companies to invest here, such as Volkswagen,
Wal-Mart, Samsung, and there were 15companies of the
top 500 companies to invest in Jilin province, 16
companies invested in Heilongjiang province. And the
invested scale and technology content are increasing
continuously, the amount of investment are added
obviously. For example, the amount of added
investment was USD 0.86 billion, 28.6% of the total
foreign investment in 2001 in Liaoning province.
But comparing with east part, northeast three
provinces have not changed the comparative advantage
to competitive advantage. The big projects which can
improve the local economic development are not more.
So there is a long way to compare with the east part, not
only in the scale but project of foreign capital used. In
2001, the total amount of foreign capital used was USD
5.262 billion in northeast three provinces, just was
33.4% of Guangdong province( which total amount was
USD 15.755 billion in 2001.), 71.6% of Jiangsu
province ( which total amount was USD 7.35 billion ).
On the other hand, the successful rate of foreign
projects is low. In Liaoning province from 1979 to 2001,
accumulative amount for foreign capital specified in
contracts was USD 53.81 billion, the amount of foreign
capital actually used was USD 28.66 billion, just 52.5%
of the one of foreign capital specified in contracts.
Heilongjiang province was 73% at the same time. The
main reason was that the project didn’t have appeal.
And the governments pay attention to formulate
preferential policies to the neglect of the project
demonstration. Others owing to the northeast three
provinces in remote districts, they didn’t have quick
access to information, which led not to understand the
detailed credit standing for foreign investors. So
sometimes the enterprisers were deceived.
3.4
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The ways for utilization of foreign capital
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Nature and Science, 3(1), 2005, Xiong and Guan, Analysis of Foreign Capital Used in China’s Three Provinces
There are many ways for utilization of foreign
capital in northeast provinces, such as, foreign direct
investment, foreign government loans, international
finance corp. loans, enterpriser stock in the abroad
financial market. For example, Heilongjiang province,
there were 27 projects of international finance corp.
loan and foreign government loan in 2001, the amount
was USD 0.29 billion, increased by 6.2% over the
preceding year. Jilin province, the foreign loan was
USD 0.18 billion in 2001, increased by 17.7% over the
preceding year, such as Jilin Hada bay electric power
factory (Japanese loan), the project of chemical
fertilizer (Span loan). All of these improved the
economic development of Jilin province.
technology, and help them to form their own R&D
ability. At the end, it will get common development
between foreign and local enterprises which help each
other to increase the local industrial level.
Secondly, they should strengthen the building of
basis facilities. Now the central government is putting
into effect for 100 projects to adjust and reform the old
industrial bases in China’s northeast. These projects will
improve the northeast three provinces’ basis facilities
and revitalize the old industrial bases. At the same time,
they also be perfecting some law and regulations,
improving work efficiency of government, simplify the
examination and approval system of foreign investment,
and increase transparency of examination and approval.
4 Developing course for utilization of foreign
capital in northeast three provinces
4.2 Utilization of foreign capital according to the
concrete industrial condition and distribution
condition of northeast three provinces, and bring
along the development of related industry
Northeast region is the bases of heavy and
chemical industry. The industry is their economic
mainstay which affects the social and economic
development. But others estate didn’t develop enough.
As the case of Harbin, the ratio between the estates of
agriculture, animal husbandry, fishery and processing as
these raw material was 1: 0.38. If this ratio gets 1: 0.85
that is the average level of the whole nation, even if the
scale estate of agriculture, animal husbandry and fishery
doesn’t enlarge, the output value will increase RMB 15
billion annually. The developing potentials are very
huge, and the region of northeast three province is rich
in natural resources. So the foreign capital should bring
along the development of related industry. For example,
absorbing foreign capital and using modern productive
and processing technology to develop characteristic
production of agriculture and animal husbandry, and
actively expend follow-up processing to add to the
additional value of products, accomplish the industry
management of agriculture and animal husbandry.
Firstly, we should absorb the foreign capital to
distinctive and superior resources’ development and
deep-processing. For example, we can choose some
projects, such as the dairy products, green agriculture
products and feed, which are high technology applicable.
These products can replace import- products, and have
large export- market. These projects don’t need large
money, so it is relatively easy to absorb foreign
investment and will be high technology applicable.
They can combine speedily with the local superior
Now the central government stress to reform the
old industrial bases in China’s northeast. It is the most
important strategy after the strategies of opening
China’s coastal region and developing China’s western
region. Under these circumstances, the northeast three
provinces should utilize foreign capital effectively to
adjust their industrial structure, improve economic
development according to their industrial condition and
distribution condition.
4.1
Improve the whole investment environment
The whole investment environment is the sign of
economy and culture level in one area, which is the
main factor to effect foreign investment. The reforming
and adjusting the old industrial bases in China’s
northeast will improve the investment environment of
northeast three provinces. The government of northeast
three provinces should take positive measures to
promote foreign investment other than the national
favorable policies.
Firstly, the local government should analyze and
research distribution conditions of every region
carefully, define industrial and styles of foreign
investment clearly, and put forward implementation
plan to avoid the competition blindly for foreign
projects among enterprises. While government guides
investment work, they should avoid more interventions,
stress on long-term plan to invest foreign capital and the
substance of foreign capital, guide the enterprises to
stress on digest and absorb what they invest the
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Nature and Science, 3(1), 2005, Xiong and Guan, Analysis of Foreign Capital Used in China’s Three Provinces
conditions to improve the productive ability, adapt the
demand of home and abroad markets, and improve the
product’s sales volume.
Secondly, we should absorb foreign capital to the
superior industry to reduce its cost of production,
improve its competitive power. So these industries
should absorb foreign investments which have abundant
funds and technology, such as transnational corporation,
which has higher technology than domestic enterprises,
and has large R&D capacity to make technology
renewal and progress, also bring along the local middle
and small enterprises development.
4.3 Encourage the foreign capital to invest the high
and new technology industry
Three Northeast provinces had better science and
technology capacity. Shenyang, Changchun, Harbin and
Dalian have many universities and institutes and
abundant human resources. They have formed some
technology-intensive industries, such as oil and
chemical, automobile, equipment manufacturing and
biological industries. So we should give full play to the
science and technology of three northeast provinces to
combine with foreign capital and advanced R&D
institutes, develop high and new technology industry to
bring along local technology progressed in order to
reduce the distinction between home and world
advanced technology. On the other hand, because there
is big risk to invest in high and new technology industry,
we should absorb not only FDI, but also indirect
investment, such as the capital of international capital
market. It is an effective way to invest in high and new
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technology industry which can adjust the industrial
structure of old industry bases in China’s northeast.
Correspondence to:
Juan Xiong
School of Management
Beijing University of Aeronautics and Astronautics,
Beijing 100086, China
Email: xiongjhlju@hotmail.com
Acknowledgement:
This paper was a part of the program of science
and technology by the Science and Technology
Government Office, Heilongjiang Province of China.
References:
[1]
[2]
[3]
[4]
[5]
Heilongjiang Statistical Yearbook.
Jilin Statistical Yearbook.
Liaoning Statistical Yearbook.
Chin Statistical Yearbook.
Sibao Ding. “The way of China’s Northeast Appearance”.
CHINA OPENING HERALD, No.9, 2003.
[6] Sibao Ding. “The Problem and Outlet of China’s Northeast”.
CHINA OPENING HERALD, No.9, 2003.
[7] Xiaoling Huang. “Geographic Advantage of Central/Western
China and FDI Promotion”. JOURNAL OF INTERNATIONAL
TRADE, No.1, 2003.
[8] Jinping Zhao: Utilization of Foreign Capital and China
Economic Development P36, People Publishing House June,
2001.
[9] Shuhe Huang, Economic Daily, Dec.28, 2003.
[10] Rong Jiang, China Management Daily, Aug.4, 2003.
[11] <China Foreign Capital Utilization Report > 2004,12.
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Nature and Science, 3(1), 2005, Xiong and Guan, Analysis of Foreign Capital Used in China’s Three Provinces
Appendix 1. Total Amount of Foreign Capital Actually Used (USD 100 million)
Other
Total
Foreign Loan
Direct Foreign Investments
Foreign
Investments
Year
Number
Number
Number
Value
of projects
Value
of projects
Value
of projects
1993
83595
389.60
158
111.89
83437
275.15
2.56
1994
47646
432.13
97
92.67
47549
337.67
1.79
1995
37184
481.33
173
103.27
37011
375.21
2.85
1996
24673
548.04
117
126.69
24556
417.25
4.10
1997
21138
644.08
137
120.21
21001
452.57
71.30
1998
19850
585.57
51
110.00
19799
454.63
20.94
1999
17022
526.59
104
102.12
16918
403.19
21.28
2000
22347
593.56
100.00
22347
407.15
86.41
2001
26140
496.72
26140
468.78
27.94
2002
34171
550.11
34171
527.43
22.68
2003
41081
561.40
41081
535.05
26.35
According to 2004China Statistical Yearbook
Appendix 2. Actually Used Foreign Direct and Other Investment by Region (USD 10000)
2002
Region and Sector
2003
Foreign Direct
Foreign Other
Foreign Direct
Foreign Other
Investment
Investment
Investment
Investment
Liaoning
431168
282410
Jilin
24468
19059
Heilongjiang
35511
32180
Shandong
473404
Jiangsu
1018960
1056365
Shanghai
427229
546849
Zhejiang
307610
498055
Fujian
383837
259903
Guangdong
1133400
6606
197732
601617
782294
227041
According to 2004China Statistical Yearbook
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